“It will mean less affordable housing being built, and more segregated developments”

“Decoupling the supply of affordable housing from Section 106 appears to be an existential threat to its provision,” says Troy Healy, Principal Planning Manager at North Northamptonshire Council. “The risk is losing every social unit built through Section 106.” 

 

A total of 49% of homes completed by housing associations in 2021-22 were acquired via Section 106, according to research by Inside Housing. For some registered providers, Section 106 provides 100% of their supply of new homes.

 

The importance of on-site affordable housing is highlighted in a statement by the National Housing Federation in response to the first publication of the Levelling Up Bill. Kate Henderson, Chief Executive of the National Housing Federation said, “We’ve been clear in our conversations with government that the delivery of on-site affordable housing must be protected.” 

 

The lack of an upfront payment could leave neighbourhoods feeling no benefit and having no capacity to support increased demand from urban regeneration

 

The government has said that alongside the bill it will introduce a “Right to Require” which will allow “local authorities to determine the portion of the levy they receive in-kind as onsite affordable homes.” However, a paper from the Centre for Social Justice, introduced by Eddie Hughes MP, Member of Parliament for Walsall North, former Parliamentary Under-Secretary of State for Housing and Rough Sleeping until September, casts references to the “Right to Require” into doubt: “This is not a right which currently has any place within the Bill—it is something left entirely to regulations. It would be better to have clarity on this within the primary legislative framework as it is a crucial aspect of ensuring that on-site housing is preserved. 

 

“Furthermore a ‘right to require’ is not a ‘requirement to require’. In other words, this system runs the risk of delivering a lower proportion of on-site affordable housing as compared to past performance. It therefore leaves open the question of how this right will interlink with the government’s wider ambition at least to maintain on-site affordable housing supply.”

 

“In simple terms, if infrastructure is required, it will be paid for by an earlier development – someone else’s development. This is not necessarily a good thing”

 

The lack of an upfront payment could leave neighbourhoods feeling no benefit and having no capacity to support increased demand from urban regeneration – including GP surgeries, roads or other needs.

 

The Local Government Association urged the government to reconsider the timing of the levy charge: “It is vital that new occupants of homes and wider communities get the infrastructure they need, and that councils can access sufficient funding for this infrastructure in line with the ambition in Local Plans… There must be a financial mechanism to secure upfront infrastructure at an earlier stage than the point of occupation.” 

 

In their co-written article, lawyer Nicola Gooch, partner at Irwin Mitchell and Matt Spilsbury, senior director of planning and development at CBRE state: “In its current form the new levy will sever the link between the development that is coming forward and the infrastructure that is being funded by it.” 

 

“In simple terms, if infrastructure is required, it will be paid for by an earlier development – someone else’s development. This is not necessarily a good thing,” write Gooch and Spilsbury. “There can be no guarantee that the infrastructure funding delivered by a new development will be spent in the vicinity of the development itself, meaning it could make it harder to generate local support for planning applications.”

 

Finally, there are concerns that gross development value can be manipulated, as it relies on an open-book approach when it comes to valuation.  

 

Local authorities will also be able to borrow against future levy revenues, described as an “eye-wateringly bad idea” 

 

Healy also doubts the payment of the new Infrastructure Levy will cover the cost of affordable housing previously provided through Section 106. “The loss of in-kind contributions will see further losses to procurement, administration and the profit margins of third parties,” Healy says, who points out that authorities have struggled to spend CIL income efficiently in the past. 

 

In their article, Gooch and Spilsbury have suggested the GDV-based levy could “perversely incentivise developers to strive harder to drive down costs and maximise returns.” 

 

“Spatially, this could lead to a risk-off scenario with investors, funders and developers discouraged from delivery on more complex, higher risk, higher density, brownfield sites in urban areas and lower value locations” in favour of “lower risk greenfield, edge-of-settlement, and low-density urban sites,” which Gooch and Spilsbury describe as a possibly “highly damaging unintended consequence.”

 

The government’s impact assessment says the Infrastructure Levy “has been designed such that local authorities can deliver at least as much onsite affordable housing as the current” and notes that onsite housing can be delivered as an in-kind payment. Local authorities will also be able to borrow against future levy revenues, described by one industry insider as an “eye-wateringly bad idea.” 

 

The Centre for Social Justice has also pointed out that using a portion of gross development value to calculate the Infrastructure Levy means neighbourhoods with depressed property values will get less money for community infrastructure and affordable housing – in other words, the opposite of “levelling up”.

 

“I can’t see how this would precipitate a significant upswing in social housing provision, which is what we are desperate for,” says architect Dinah Bornat, ZCD Architects. “At best, it seems like tinkering and at worst, it could make a dire situation even more dire.” 

 

“I wait with baited breath for the opposition to announce a radical house-building programme that doesn’t rely on the private sector to deliver it,” says Bornat.